Now that Puerto Rico is moving into recovery and rebuilding after the Hurricane Maria disaster, billions of dollars in federal disaster spending are flowing to the island. Estimates put hurricane damage at $95 billion, and Puerto Rican Gov. Ricardo Rosselló is asking various federal agencies for $94 billion in grants.

With this much public money on the line, monitoring how U.S. tax dollars are spent in the recovery will be crucial to prevent waste, fraud, and shoddy work. The best way to do that is by awarding contracts through the open bidding process, which allows the largest number of businesses a chance to compete to offer the best deal. These types of contracts generally require more scrutiny and oversight than no-bid deals.

So far, competitive bidding hasn’t been a top priority for federal agencies responding to Hurricane Maria. Nearly half of the 540 federal contracts signed so far (as of November 16), totaling $252 million, were awarded outside the open bidding process, according to federal procurement data.

A contractor providing intelligence and training services to the Defense Department billed luxury cars to the government, sought reimbursements for the salaries of well-connected secretaries who did little in the way of actual work and exceeded statutory caps for executives’ pay, according to a new audit.

All told, the Defense Contract Audit Agency (DCAA) questioned $50 million the British company New Century Consulting billed to the Pentagon, according to a report summarized in a letter from Sen. Claire McCaskill, D-Mo., to Defense Secretary Jim Mattis. The vehicles, including Porsches, a Bentley and an Aston Martin, were used exclusively by the CEO and other top executives at the company, DCAA found.

New Century operated as a subcontractor for Imperatis Corp., which has an extended history of problematic dealings with the federal government. Last year, Imperatis abruptly quit a cybersecurity contract it had with the Office of Personnel Management and the Homeland Security Department, citing “financial distress.” Defense contracted with Imperatis on its Legacy East project to provide “counterinsurgency intelligence experts” to train Afghani security forces.

The U.S. Attorney for the Middle District of Georgia has announced that an indictment charging Isaac J. Culver, III, age 47, Lizella, Georgia, Dave Carty, age 48, Macon, Georgia, and their business, Progressive Consulting Technologies, Inc., with conspiracy to commit wire and mail fraud, ten counts of wire fraud, one count of mail fraud, and conspiracy to launder the proceeds of unlawful activity was unsealed on June 14, 2017.

The charges against Culver, Carty, and Progressive Consulting Technologies, Inc. stem from the sale of 15,000 Ncomputing devices to the Bibb County School District in 2012. Culver and Carty were arrested and made their initial appearances in the U.S. District Court on June 14th. They were released on $15,000 bond for each man.

Each of the charges against Culver, Carty, and Progressive Consulting Technologies, Inc. carry a maximum possible sentence of 20 years imprisonment. The fine on the conspiracy to launder the proceeds of unlawful activity carries a maximum fine of $500,000.00 or twice the value of the property involved in the transaction, whichever is greater. The other charges carry a maximum possible fine of $250,000.00 each.

The indictment is only an allegation of criminal conduct. Each person is presumed innocent until and unless proven guilty in a court of law.

This case was investigated by the Federal Bureau of Investigation and Internal Revenue Service.

Under a new FAR rule, standard language in confidentiality agreements could lead to disqualification from contracting or False Claims Act liability.

In January, the FAR Council issued a final rule regulating confidentiality agreements between prime contractors and their employees and subcontractors. The rule implements Section 743 of the Consolidated and Further Continuing Appropriations Act of 2015, Pub. L. 113-235 (Dec. 6, 2014). As we previously reported, a proposed rule was issued in January of 2016 and a class deviation was issued by the Department of Defense late last year. The final rule largely adopts the proposed rule’s language and applies to all solicitations and resultant contracts that are funded with fiscal year (FY) 2015 funds. Contractor Employee Internal Confidentiality Agreements or Statements, 82 Fed. Reg. 4717 (Jan. 13, 2017).

In summary, the new FAR 52.203-19 bars contractors from requiring their employees or subcontractors to sign or comply with “internal confidentiality agreements or statements” that would prohibit them from reporting “waste, fraud, or abuse” on a federal contract. FAR 52.203-19(b). Contractors who disregard this rule are prohibited from receiving federal funds. FAR 3.909-1(a).

Because of the broad reach and significant consequences of non-compliance, the contracting community should take notice of this new rule’s requirements.

A North Carolina-based defense contractor defrauded the U.S. government of more than $13.6 million over the course of a decade, according to documents filed in U.S. District Court in Norfolk.

But the government is still doing business with the company: Global Services Corp. of Fayetteville, N.C.

Two men – one of whom lives in Hampton Roads – have pleaded guilty, but federal prosecutors have worked the past several months to keep secret the identity of the contractor and its owner.

Court documents do not name the firm or two Newport News-based companies that they say were integral to the conspiracy. They are identified only as Firm G, Company A and Company B.

In most cases, the documents also do not name the president of the defense contracting firm – who prosecutors say was the primary beneficiary of the fraud. The documents generally identify him only by the initials “PAM.”

On one occasion, however, prosecutors filed a document in connection with an accomplice’s case that identified him as Philip A. Mearing – the president of Global Services Corp.

Federal contractors who require employees to sign confidentiality agreements—including those selling only commercial products or in small quantities—need to examine their agreements closely.

For the last two years, the government has sought to prohibit confidentiality agreements that restrict employees’ ability to report fraud, waste, or abuse to “designated investigative or law enforcement representative[s]” for federal agencies authorized to receive that information.”

Most recently, the Department of Defense issued a new class deviation on November 14, 2016 prohibiting DoD from using funds from recent appropriations to contract with companies using overbroad confidentiality agreements. While these restrictions may not be new, the deviation’s broad application and significant consequences mean that contractors should give close scrutiny to ensure any agreements with employees comply with the prohibition.

On October 29, 2015, the Department of Defense (DoD) renewed the DFARS deviation implemented in February, which prohibits contracting with entities that require employees or subcontractors to sign internal confidentiality agreements or statements that prohibit, or otherwise restrict, such employee or subcontractor from lawfully reporting waste, fraud, or abuse.

Defense contractors should review their policies to ensure they meet the requirements of these new clauses.

Defense contractors and government contracts attorneys already may have noticed the deviation in solicitations issued since February. The DoD memorandum instructs defense agencies to continue including two DFARS clauses in all future solicitations, including solicitations for the acquisition of commercial items under FAR Part 12.

What would you do if you responded to a request for quotation, received an order, and shipped products — only to later discover that the entire transaction was fake?

This is what happened recently to a businesswoman who reported to the Georgia Tech Procurement Assistance Center (GTPAC) that she received purchase orders from two out-of-state public universities, one located in Mississippi and the other in Minnesota. She responded by shipping goods, and sent along her invoice.

It turns out that the purchase orders were bogus. This small business now finds that it will not receive payment and may not be able to recover the equipment that was shipped.

What are some of the lessons you can learn from this unfortunate experience? Here are six tips:

An unsolicited order from a governmental entity (e.g., agency, city, county, school) is a virtual impossibility. If you didn’t submit a bid, chances are you won’t receive a purchase order.

When you receive a purchase order, make sure it identifies the government official placing the order and is signed.

Never assume that any purchase order is valid. Call the point-of-contact (POC) listed on the order to make sure it is legitimate. Be alert to the possibility that the phone number on the order might be bogus too.

Even if the order appears to be legitimate, conduct an Internet search for the purchasing office of the government buyer to see if the location and contact information line-up with what’s on the purchase order. If the contact phone numbers are different on the order and on the web site, call the buyer to inquire about the order — and be sure to call the buyer at the phone number listed on the government entity’s website.

Also pay attention to the “ship to” location. If it looks suspicious (i.e., it’s a location other than the government entity’s location), ask the buyer why it’s different.

If, after checking, you suspect the purchase order to be fake, report the incident to the real government organization as well as to appropriate law enforcement authorities.

In the case brought to GTPAC’s attention, the business has reported the incidents to the purchasing offices of both universities. She furnished them with copies of the documents she received — orders that are on official letterhead and appear to be legitimate. She also reported the incidents to local law enforcement authorities who are investigating the locations where the equipment was shipped.

GTPAC recommends that all businesses stay alert to possible fraud in the government contracting process and in other government functions. Here are some tips:

Be wary of what may be fraudulent phone calls and correspondence. Veterans and small businesses are frequent targets. Remember that when you register in public databases, your contact information is readily available to anyone with access to the web.

In addition to being alert to the possibility of phony purchase orders, be wary of offers to register your business in a government database, offers to sell you access to contracting decision-makers, and offers to guarantee you a government contract. While offers for similar services can be legitimate, make sure you know who you’re dealing with and what you’re buying.

Remember the old saying, “If something looks too good to be true, it probably is.” Whenever you receive a call, letter, fax or email about something involving government contracting — and it looks fishy — feel free to contact your team at GTPAC. We’ll be glad to give you any facts we are aware of, along with suggestions about how you might best proceed.

Under the direction of former Chairman Sam Graves (R-Mo.), the House Small Business Committee over the past six years made overhauling the federal contracting process one of its top priorities, spearheading a number of initiatives intended to funnel more work – and by extension, taxpayer money – to small businesses. When Graves stepped down from the panel at the end of last year, it was unclear whether that effort would continue, or at least whether it would remain near the top of the committee’s to-do list.

Instead, it’s like he never left.

Now led by Rep. Steve Chabot (R-Ohio), the small business committee has picked up right where Graves left off. Chabot and crew recently held a series of hearings on a number of challenges facing small contractors, and last week, the panel marked up and approved a comprehensive package of changes stemming from those conversations.

“We know that when small businesses compete for federal work, it creates jobs, improves the quality of work, and saves taxpayers’ money,” Chabot said when rolling out the proposal, calling the proposed bill – dubbed the Small Contractors Improve Competition Act – “a commonsense approach to make sure that Washington is working with Main Street.”